What do individual stockholders gain when they purchase shares in a company?
Social Studies · Middle School · Mon Jan 18 2021
Answered on
When individual stockholders purchase shares in a company, they gain several things:
1. Ownership: Each share represents a fraction of ownership in the company. Shareholders become part owners of the company and have an interest in its performance.
2. Dividends: Companies may pay profits to their shareholders in the form of dividends. Not all companies pay dividends, and those that do may not do so regularly, but when they are paid, dividends provide a source of income to shareholders.
3. Capital Gains: If the value of the company increases, the value of the shares typically increases as well. Shareholders can sell their shares for more than they purchased them, realizing a capital gain.
4. Voting Rights: Shareholders often get the right to vote on important company decisions, such as electing the board of directors or approving mergers or acquisitions. The number of votes a shareholder has is usually proportional to the number of shares they own.
5. Liquidity: Shares can usually be bought or sold quickly on stock exchanges, providing a way for investors to readily convert their investment into cash.
6. Limited Liability: Shareholders are not personally responsible for the actions and debts of the company. Their financial risk is limited to the amount they invested in the shares.